roptions (version 1.0.3)

butterfly.put: Butterfly Put Spread Strategy Function

Description

This function can be used to develop a Butterfly Put Spread Strategy

Usage

butterfly.put(
  k1,
  k2,
  k3,
  p1,
  p2,
  p3,
  spread = c("long", "short"),
  llimit = 20,
  ulimit = 20
)

Arguments

k1

Excercise Price of 1st Long Put Option (Long Spread)/ Excercise Price of 1st Short Put Option (Short Spread)

k2

Excercise Price of Short Put Option (Long Spread) / Excercise Price of Long Put Option (Short Spread)

k3

Excercise Price of 2nd Long Put Option (Long Spread) / Excercise Price of 2nd Short Put Option (Short Spread)

p1

Premium of 1st Long Put Option (Long Spread)/ Premium of 1st Short Put Option (Short Spread)

p2

Premium of Short Put Option (Long Spread) / Premium of Long Put Option (Short Spread)

p3

Premium of 2nd Long Put Option (Long Spread) / Premium of 2nd Short Put Option (Short Spread)

spread

Type of Spread, Default: c("long", "short")

llimit

Lower limit of stock price at Expiration., Default: 20

ulimit

Upper Limit of Stock Price at Expiration, Default: 20

Value

OUTPUT_DESCRIPTION Returns the profit/loss generated from the strategy along with the profit/loss of individual contract and an interactive graph for the same.

Details

The long put butterfly spread is created by buying one put with a lower strike price, selling two at-the-money puts, and buying a put with a higher strike price. Net debt is created when entering the position. The short put butterfly spread is created by writing one out-of-the-money put option with a low strike price, buying two at-the-money puts, and writing an in-the-money put option at a higher strike price.

Examples

# NOT RUN {
butterfly.put(100, 105, 95, 2.2, 3.2, 1.25, spread = 'long')
# }